Priority debts
The following is a list of priority debts and the penalty that could be applied.
Once you have a list of your debts, you must start with your priority debts.
| Debt | Penalty |
|---|---|
| Rent or service charge | Eviction |
| Council Tax | Enforcement agents Money taken from wages or benefits Bankruptcy Imprisonment |
| Gas or electric | Disconnection Money taken from benefits |
| Unpaid court fines | Enforcement agents Money taken from wages or benefits Bankruptcy Imprisonment |
| Child Maintenance | Enforcement agents Money taken from wages or benefits Bankruptcy Imprisonment |
| Income tax arrears | Imprisonment |
| TV licence | A fine Imprisonment |
| County court judgement | Enforcement agents Money taken from wages Charging order Money or assets frozen |
| Tax, VAT, National Insurance | Enforcement agents Money taken from wages or charging order Bankruptcy County court judgement |
| Hire purchase | Repossession County court judgement |
If you have rent arrears, this will be your first debt to deal with as you could be evicted from your home.
Then you need to decide an order to deal with your other priority debts.
Take into account how the consequences of not paying will affect you and your family.
Contact your most important priority creditor and:
- explain the financial difficulties you are having
- explain that you are putting together a financial statement
- suggest an amount to pay them each month - this will be a regular payment, plus a contribution towards the arrears
If the creditor refuses this offer, increase your offer and advise them you are seeking money guidance.
Once the payment plan has been agreed, start paying the agreed amount straight away. Update your financial statement and recalculate your disposable income to take this payment into account.
Then you can repeat the above steps with your other priority creditors until all your priority debts have been dealt with.
Non-priority debts
Non-priority creditors do not have the power to take more serious action against you like evictions or imprisonment.
You may think a non-priority debt is more urgent to you, but you need to deal with your debts in order of their priority.
Non-priority debts include:
- credit cards
- personal loans with finance companies (if not secured on property)
- bank or building society loans and overdrafts
- charge cards
- catalogues and mail orders
- personal debts to family and friends
- doorstop and payday loans
Contact your creditors to tell them you are having financial difficulties.
You can ask for a temporary hold on recovery and interest charges whilst you sort out your financial statement and choose an option to deal with your debts.